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Gold stock pairs trade with Agnico-Eagle Mines (AEM)

April 2, 2012

02 April

This week I’ll show a gold stock: Agnico-Eagle Mines (AEM) with a bullish 14 week RSI divergence against the S&P500 Index.

 

Aemspx

Gold stocks have dramatically underperformed the S&P500 Index since September 2011.

Now compare AEM against other gold stocks

Agnico-Eagle Mines (AEM) versus Philadelphia Gold & Silver Index (XAU)

Aemxauweekly

  • In this case the divergence was in place through the winter. The rally from the February low has taken the RSI back above 30
  • The shallower decline of the last leg down is evident

The daily ratio chart shows the other criteria being met.

Aemxaudaily

  • Successive bullish daily RSI divergences that fail to stem the decline
  • A divergence that has the RSI above 30 at the low
  • There isn’t a weekly MACD divergence (preferable but not essential) but there is a daily MACD divergence
  • Now the initial rally has taken place, the ratio consolidated since 09 March
  • Monday’s action (not yet shown) had AEM up 4.73% and XAU up 1.97%, breaking the 09 March high (blue line)
  • That is a buy signal for this pair, with the stop loss below the red arrow, the 21 March minor low (5% lower)

Last Monday’s idea hasn’t worked so far [buy iShares Broker Dealers (IAI) versus iShares Emerging Markets (EEM)]. It hasn’t been proved wrong yet and is nowhere near its stop but you can often tell which ideas will work by how the trade starts off.

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